Among the purposes of Form 8606 is reporting a "backdoor Roth IRA" conversion, the non-IRS term for converting funds from a traditional IRA or 401(k) plan into a Roth IRA. The money rolled into the IRA is taxable to the extent it hasn't already been taxed, including the earnings on the money until it is converted to a Roth IRA. The taxpayer should have received a Form 1099-R for the distribution that was converted to a Roth IRA.
To report a backdoor Roth IRA conversion, from the Federal Section of the tax return (Form 1040) select:
- Deductions
- Adjustments
- Nondeductible IRAs
- Net Amount converted from traditional, SEP, and SIMPLE IRAs to Roth IRAs in 20xx - Enter the amount converted.
Note that the taxable amount of the distribution is carried to Form 1040 from Form 1099-R box 2a. Be sure to enter the correct taxable amount in that box.
Note: This is a guide on entering a backdoor Roth IRA into the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information:
IRS: FAQs Regarding IRA Rollovers and Roth Conversions
IRS: Topic No. 451 Individual Retirement Arrangements (IRAs)
IRS: Topic No. 413 Rollovers from Retirement Plans
IRS: Instructions for Form 8606, Non-Deductible IRAs
IRS: Publication 590-A, Individual Retirement Arrangements (IRAs) 2020 - need to update for 2021